Further Crude and Refined Fuel Price Gains Could Push U.S. Rates Higher

Bank of America Securities warned Friday, Nov. 6, that further increases in crude and refined fuel prices over the next three to six months could push interest rates significantly higher.

The U.S. two-year nominal interest rate swap, a measure of market expectations for rates over the next two years, has risen 113 basis points year to date. It gained 196 basis points cumulatively on trading days when oil prices rose and fell 83 basis points on other trading days.

Rate swings in Britain and Germany were larger than those in the United States. Bank of America Securities said resilient U.S. growth and consumer spending, along with a relatively tight labor market, could leave the Federal Reserve with fewer constraints if rising energy inflation leads policymakers to consider a rate hike.